ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 12, PUNE vs. ZAWAR SALES LIMITED, PUNE

Briefly stated, the facts of the case are that the assessee sold certain land and declared long term capital gain on sale thereof. The AO opined that such income should have been offered as “Business income” instead of long term capital gain. Accordingly, penalty was imposed, which came to be deleted in the first appeal.

We have heard the ld. DR through virtual court and gone through the relevant material on record. It is seen that the assessee treated land as fixed asset since earlier years and did not convert it into stock in trade. The long term capital gain was offered on sale of such land and tax was accordingly paid. The AO treated the gain arising from the transfer of such land as “Business income” instead of long term capital gain as offered. It is a case of difference of opinion between the assessee and the AO on the facts already disclosed by the assessee. Merely because the AO treated the amount of income already offered differently from the one portrayed by the assessee, cannot in our considered opinion be a cause for imposing penalty u/s.271(1)(c) of the Act. The Hon’ble Supreme Court in CIT Vs. Reliance Petro products 322 ITR 158 (SC) has held that no penalty should be imposed when the assessee adopts a bona fide view and has declared all the necessary particulars concerning the income in dispute. Since the view of the ld. CIT(A) is in accordance with the ratio laid down in the Reliance Petroproducts (supra), we endorse the same.

The second issue on which penalty has been imposed is disallowance of Foreign tour and travelling expenses amounting to Rs.4,45,482/-. The AO made disallowance because relatives of the directors also joined in the foreign tours. This was followed by the penalty. The CIT(A) deleted the penalty against which the Revenue has come up in appeal before the Tribunal.

We have heard the ld. DR and gone through the relevant material on record. It is seen from the impugned order that the assessee incurred foreign tour expenses for conducting meetings with cement dealers of India Cement Ltd. and Visaka Industries Ltd., for which it was acting as C&F agent. These expenses included some amount spent on minor sons and daughters of the directors. The ld. CIT(A) has rightly relied on ACIT Vs. TRB Exports P. Ltd. 40 SOT 22 (ITAT) Chandigarh at para 5.4 of the impugned order, in which the Tribunal deleted the penalty under similar circumstances. No contrary precedent has been brought on record by the ld. DR. We, therefore, uphold the deletion of penalty.

In the result, the appeal is dismissed. Order pronounced in the Open Court on 11th August, 2020.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 11th August, 2020 सतीश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2.